Paid time off matters: Ensuring minimum standards for the people at our suppliers

We believe paid time off is an important benefit for workers in our economy. Today we’re announcing that over the next year we will make changes to ensure that a wide variety of suppliers that do business with Microsoft in the U.S. provide their employees who handle our work with at least 15 days of paid leave each year.

We’re publishing this blog today to share information both on what we’re doing and why we’ve decided to take this step.

What We’re Doing. Let me share the most significant aspects of what we’ve decided to do:

First, we’re focusing on ensuring a minimum of 15 days of annual paid time off for the eligible employees at our suppliers, either through 10 days of paid vacation and five days of paid sick leave or through 15 days of unrestricted paid time off.

Second, this new benefits minimum will apply to suppliers with 50 or more employees in the United States. It will apply to their U.S. employees who have worked for them for more than nine months (1500 hours) and who perform substantial work for Microsoft. We recognize that this approach will not reach all employees at all of our suppliers, but it will apply to a great many.

Third, because we recognize that this approach may increase the costs for some of our suppliers, our plan is to work with them to implement these changes over the next twelve months. We appreciate that this may ultimately result in increased costs for Microsoft, and we’ll put a process in place for addressing these issues with our suppliers.

We want to be clear. Many of our suppliers already offer strong benefits packages for their employees, including paid time off. We don’t currently have data on how many do and how many do not provide paid time off, but our new policy will ensure that every supplier with 50 or more employees will do so for employees doing substantial work for Microsoft.

We’re committed to working with our suppliers to understand the impact of this change on them and pursue the best approach to implement this well. We’re not aware of any large company that has taken the approach that we’re launching today, so we want to be thoughtful and well-informed about our implementation of this step. We don’t want to make changes that undermine the breadth and diversity of our suppliers. For example women/minority owned businesses account for over $2 billion of our supplier services in the U.S. We also want to be sensitive to the needs of small businesses. For these reasons, we are going to launch a broad consultation process with our suppliers so we can solicit feedback and learn from them about the best way to phase in the specific details. We’re committed to the direction that we’ve set, but focused on learning as much as we can about how to implement this effectively.

Why We’re Doing This. Over the past year there has been increasing debate about income inequality and the challenges facing working people and families. While this is often discussed as a general topic, at times individuals have raised pertinent questions for companies in the tech sector, including Microsoft. This has led us to step back and think anew about the types of benefits policies we want to have with our suppliers.

As we’ve studied the issue, we’ve reached a couple of conclusions:

First, paid time off benefits both employers and employees by contributing to a happier and more productive workforce. Research shows paid time off contributes to the health and well-being of workers and their families, strengthens family ties, increases productivity, improves retention, and lowers health-care costs. In addition, as a University of Pittsburgh study recently concluded, paid sick leave contributes to the health of one’s colleagues. As the study found, one flu day reduced on-the-job transmission by 25 percent, while two flu days reduced such transmissions by 39 percent.

Second, the lack of paid time off disproportionately impacts low-wage earners. While estimates vary, the overall trend is clear. As one study found, only 49 percent of those in the bottom fourth of earners get paid time off, compared with almost 90 percent among the top quarter of earners. Lack of paid time off also has a disproportionate impact on minorities at a time when the tech sector needs to do a better job of promoting diversity.

As we considered these conclusions, we also thought about them in the context of the benefits policies we have for Microsoft’s full-time employees. We’ve long recognized that the health, well-being, and diversity of our employees helps Microsoft succeed. Our commitment to them extends beyond the workplace. That’s why we have long provided industry-leading benefits for our employees, including comprehensive health and wellness programs for families, child care support, paid annual leave, paid sick leave, and paid times off for new moms and dads.

We then thought about this in the context of the broader supplier relationships on which we rely. Like many companies in many industries in the United States, we rely on a wide variety of other companies that supply us with goods and services that reflect their core competencies. From building maintenance to management consulting and campus security to software localization, we rely on a large group of outside companies to do what they do best. The people who work for our suppliers are critical to our success and we want them to have the benefit of paid time off.

By taking this new step, we will focus our resources on doing business with companies that share a commitment to providing these types of strong benefits for employees.

In sum, we concluded that this is the right step for our business. We also hope that our experience – and especially the feedback we receive from our suppliers – will be valuable to others considering similar changes. Our goal is to make this change in a thoughtful way and to share our experiences with those who are interested.